Relief over Trump reticence and Ted Baker resorts to heavily discounted share placing to support recovery plan

“The violent protests sweeping the US may have provided some distraction, but the market is relieved that the Trump administration has not responded to China’s new security law in Hong Kong with more punitive measures,” says Russ Mould, Investment Director at AJ Bell.

“This led to a rally in Asian stocks overnight and the FTSE 100 takes the ball and runs with it, hitting its highest levels since early May.

“After a strong rebound in April from the lows of late March, the month of May saw more of a slow and steady recovery with the FTSE All-World index up 10.5% in April and 4.2% in May. Investors would probably take more of the same through the summer.

“Obstacles to further share price gains include any new spate in coronavirus infections, the ongoing tit-for-tat between Washington and Beijing, and the likelihood of increasingly ugly economic data as the full impact of lockdown is revealed.

“Oil prices staged a more dramatic recovery in May and have stabilised at around the mid-$30s per barrel while gold has shined intermittently and stayed pretty solid above the $1,700 per ounce mark.”

Ted Baker

Ted Baker’s plans to raise £95 million by issuing new shares at 75p each shows just how far the mighty has fallen. The stock was trading above £31 a share just over two years ago and the subsequent decline has been brutal.

“The hugging scandal involving founder Ray Kelvin was the catalyst that subsequently saw the business hang its head in shame amid numerous accounting errors and then widespread criticism that its products had gone out of fashion.

“Now it is trying to get back up with a turnaround plan that is as much about repairing its reputation as it is trying to make its products more appealing to a wider range of people.

“The coronavirus pandemic couldn’t have come at a worse time for Ted Baker, happening just as it was trying to sort out internal problems.

“Injecting a large amount of new money into the business will give it some breathing room so it can execute on the turnaround plan.

“The growth strategy is a mixture of common sense and recognition that it needs to be sharper on cost control, engaging with customers and better with product appeal.

“What really matters is the execution of this plan and it’s going to be quite a job when there is a need to overhaul the business culture as well as operations and product lines. The hard bit really starts from now on.”

These articles are for information purposes only and are not a personal recommendation or advice.

The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.

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